Whole life insurance, also called "cash-value" insurance, is a basic and consistent type of permanent life insurance that stays in effect for your whole life at a level premium. This life insurance is a good choice if you don't think your need for it will change over time. A portion of your premium goes into a reserve fund called "cash value," which grows over the years that your policy is in effect. Your reserve fund is not taxed until you take it out, and you can borrow against it.
Most of the time, the premiums must stay the same over the life of the policy and must be paid regularly based on the amount written in the policy. You may also be able to pay all of the premiums at once with a single lump sum. This is called a "single premium." When you turn 100, your cash values will have grown to the same amount as the death benefit.
But whole life insurance is very expensive, and if you're on a tight budget, you might not be able to afford all the insurance coverage you really need. But, as long as the premiums are paid, the death benefit is guaranteed. Also, if you don't borrow against the death benefit, it will never go down.
The returns on a whole life insurance policy will change with the market and usually follow the returns on other investments, such as equity mutual funds. But if you cancel your policy, you can get your cash value in cash or as paid-up insurance.
You should get whole life insurance if you want to:
- Pay final expenses,
- Save money for a child's college or your own retirement,
- Use it to save money on taxes and plan your estate,
- Pay for a buy-sell agreement for a business,
- Give money to a charity you like,
- Give protection to key people.
Before you buy whole life insurance, you should give careful thought to how much coverage you want. Too often, people make the mistake of not having enough insurance or, even worse, of taking on too much debt. This would be a terrible mistake if you had a whole life insurance policy, because if you didn't pay your premiums, the policy could be cancelled and you'd lose everything you'd put into it. So pay attention and make sure you:
- Choose a life insurance policy with a guaranteed cash value from the first year on.
- Think about "participating" in insurance policies that can pay dividends. This can increase the value of your policy by increasing both the cash value and the death benefits.
- Pick the one that gives you the most money in the first year,
Don't buy an insurance policy that has "surrender charges" if you want to cancel it.
- If you ever can't pay your premiums, your policy lets you use the cash value you've built up to pay the premiums and keep your coverage up to date.
Find out how easy it is to shop for life insurance:
http://www.SubmitYourNewArticle.com/netquote.php
